Market Mindset

The FT reported ‘almost a third of UK investors aged over 55 have never heard of exchange traded funds’, which stands in dichotomy to the proposition that ‘an overwhelming 89% of millennials say ETFs are their investment vehicle of choice’, stated by Bloomberg. 

Evidence substantiates that the major contradiction between age demographics is most pronounced between Gen Z, Millennials, Gen X, and Boomers. The latter two older generations prefer Mutual funds as their investment vehicle of choice, and the former two prefer ETFs as the bulk of their investing portfolio. Yahoo Finance advances ‘66% of millennials say they could imagine moving to an ETF-only portfolio, whereas only 15% of Boomers say the same’. 

The rationale behind the differing investing ethos’s of different generations is clear. Older generations focus on traditional vehicles, and younger generations are importantly still receptive to traditional vehicles like mutual funds, but are credibly more open to new, innovative, investing avenues – unproven in the long term, especially those built on digital platforms. 

Reflecting on why younger generations are more adventurous investors with an appetite for high-risk, high-reward avenues. A potential justification that can be proposed is less to do with digitisation more to do with younger generations engaging in dialogues around building wealth. Especially the strategy in how to grow wealth at a compound rate, Gen Z purports that wage-based saving is futile in comparison. As of January 2026, the best instant access saver accounts range from 4.5% AER for Chase. Other banks, such as Lloyds, with their Club Lloyds Saver have variable rates 0.95%-1.20% AER, and HSBC with Online bonus saver, with a standard rate on all balances at 1.15% AER. This is dwarfed by the one of the most popular ETFs, such as the S&P 500 (SPY), that achieved 18% total return last year in 2025, and 25% in 2024, backed by Goldman Sachs.

Yet still, the SPY is a relatively low-risk ETF. If more concentrated ETFs are invested in, with sector or thematic focuses, results delivered can be even more lucrative, but evidently come with more risk appetite. The most profitable ETF in 2025 was the iShares MSCI Global Silver and Metals ETF (SLVP) which recorded a 212% gained, and in addition SILJ with a 195% gain. 

With these figures in mind, the logic does not follow on why a wealth-building driven investor would choose a regular savings account over an ETF. This raises the contention, why Gen X and Boomers have a stubbornness for ETFs. A potential reason for this friction may be less doubt-fuelled, and more motivated by tax exposure concerns. To unwind capital from mutual funds to ETFs, it could trigger Capital Gains Tax. Furthermore, since most Boomers have held mutual funds in brokerage accounts for not just years, but decades, the tax exposure is even more extraneous, and could fall into the long-term capital gains tax rate rate. In the UK, this basic rate increased to 18% this past year, and 24% for a higher rate. If a Boomer were to withdraw capital from a mutual fund, the trade-off for transitioning to ETFs would only be worthwhile if the pay-off of an ETF exceeds the performance of the mutual fund, and the lost capital – combined. For example, £1 million in a which earns an average 10% returns a year, if this is withdrawn and faces a 20% capital gains tax rate. The reaming capital invested into an ETF left could be £800,000, the returns of the ETF would have to essentially be greater than 30%, to make this strategy worthwhile. 

Even if Boomers were to go ahead with this strategy, or if capital gains tax were reduced, and ETFs’ average returns kept on exceeding their track record, this raises the question on what happens if everyone simply invested in ETFs. The possibility of this reality may be less flawless than expected. The real-time repercussions could be a lack of price discovery, reduced market efficiency, high mispricing risk. A broken market would then produce its own spell of problems.  

Disclaimer: Not financial advice.